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Economic transition and college premium in urban China

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  • Wang, Le

Abstract

China has recently undergone a series of reforms on higher education aimed at raising the level of human capital. However, relatively little is known about returns to higher education (i.e. college premium) and how it varies across population in China over time. In this paper, we contribute to the literature by examining college premium in urban China during the period of 1995–2002. We also explore the differences in college premium by gender and by sector. To isolate the causal effects of college education, we employ a novel instrumental variable approach based on heteroskedasticity in college decision to circumvent potential endogeneity and measurement error problems. Our results imply a much larger college premium and a greater growth in the college premium relative to their OLS counterparts, consistent with the general literature on returns to education. More interestingly and starkly contrasting to the existing studies using OLS in the Chinese context, our results imply that (1) the college premium is larger for women than for men in the early stage of economic reforms, but the difference decreases and becomes statistically insignificant over time; (2) the college premium is larger for workers in the state-owned enterprises than that in the non-state-owned enterprises during the early stage of economic reforms; this gap is, however, reversed in the later stage. We discuss potential reasons for these results.

Suggested Citation

  • Wang, Le, 2012. "Economic transition and college premium in urban China," China Economic Review, Elsevier, vol. 23(2), pages 238-252.
    • Handle: RePEc:eee:chieco:v:23:y:2012:i:2:p:238-252
    DOI: 10.1016/j.chieco.2011.11.001
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    3. Leszek Wincenciak, 2020. "Evolution of private returns to schooling over the business cycle in a transition economy," International Journal of Manpower, Emerald Group Publishing Limited, vol. 41(8), pages 1307-1322, May.
    4. Gustafsson, Björn & Wan, Haiyuan, 2020. "Wage growth and inequality in urban China: 1988–2013," China Economic Review, Elsevier, vol. 62(C).
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    6. Asadullah, M. Niaz & Xiao, Saizi, 2020. "The changing pattern of wage returns to education in post-reform China," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 137-148.
    7. Emran, M. Shahe & Jiang, Hanchen & Shilpi, Forhad, 2020. "Gender Bias and Intergenerational Educational Mobility: Theory and Evidence from China and India," GLO Discussion Paper Series 497, Global Labor Organization (GLO).
    8. Björn Gustafsson & Haiyuan Wan, 2018. "Wage growth and inequality in urban China: 1988–2013," WIDER Working Paper Series 163, World Institute for Development Economic Research (UNU-WIDER).
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    14. M Niaz Asadullah & Saizi Xiao, 2019. "Labor Market Returns to Education and English Language Skills in the People's Republic of China: An Update," Asian Development Review, MIT Press, vol. 36(1), pages 80-111, March.
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    More about this item

    Keywords

    Return to education; Gender gap; Economic transition; College;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J7 - Labor and Demographic Economics - - Labor Discrimination
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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